FHA Finalizes HECM Claims Processing Policies

The Federal Housing Administration on Wednesday announced new policies that will allow for faster payment of funds to mortgagees when they assign a Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage, to HUD.

The changes permit people with FHA mortgages to submit a request for Preliminary Title Approval earlier in the process and with fewer documents. Combined, these changes will reduce the time between a loan’s eligibility for assignment to HUD and the payment of claim funds to the mortgagee.  

“The Home Equity Conversion Mortgage program is an important resource for the nation’s senior homeowners who wish to age in place,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “Today’s changes simplify processes and pay mortgagee claims more quickly, providing meaningful relief to program participants as they navigate the unique challenges of today’s economic environment.”

Under previous policy, mortgagees could only submit the required information and documentation when the HECM reached 97.5 percent of the MCA. In addition, FHA will now allow mortgagees to submit original notes and mortgages after assignment claim payment rather than before, as previous policy required. By allowing earlier claim submission and by making document submission more flexible, FHA expects to shorten the time between the HECM reaching 98 percent of MCA and FHA paying the mortgagee for the claim.